10 Ways To Get Out Of Debt
Here are a few practical tips to help you bust out of that debt trap.
Ask yourself: “Can I afford it? Can I afford to pay off my existing debt with ease while adding this?” If you can’t afford it, don’t buy it.
Get a credit report to figure out exactly how deep in debt you are (you are entitled to one free report per year).
Obtain a fresh quote on your insurance every year or (even better) every six months. This way you won’t miss out when better rates come along.
Know which luxury expenses are worth cutting out. It’s a matter of “want” versus “need”.
Set up a budget and stick to it. Start by making a list of your household income, expenses, debts and balances and weigh them up against one another. See where you can trim the fat and take it from there.
Never fall behind on a payment. Once that salary comes in, pay your expenses rather than revelling in feeling flush with cash.
Never take out a loan to pay off an existing debt. This is one of the biggest mistakes South Africans make, and it sends most people spiralling even deeper into debt.
Learn to understand interest rates and inflation and prepare for them. You may have no control over them, but setting aside a little extra each month will help to mitigate the effect of these increases when they do happen.
Know the difference between good debt and bad debt. Good debt – a home or student loan – has a positive impact on your financial status and adds value to your life in a very tangible and fulfilling way. Bad debt is brought on by loans that allow you short-lived delights or non-essential luxuries.
Read up on debt consolidation and debt counselling and understand how it works.